FASB chairman's remarks at AICPA conference

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11 Dec 2009

In his remarks at the American Institute of CPAs' 37th Annual National Conference on Current SEC and PCAOB Developments earlier this week, FASB Chairman Robert H Herz addressed the following key points:

  • Independent accounting standards that are aimed at providing relevant, transparent, and unbiased financial information are of prime importance to our reporting system, our capital markets, and our economy.
  • Much of the discussion about the role of accounting standards in the economic crisis seems to confuse our role of helping to provide investors and the capital markets with relevant and transparent information on the performance and financial condition of financial institutions (along with other companies) with the regulatory need to ensure the safety and soundness of financial institutions and stability of the financial system.While these tasks often overlap, they are not the same and the setting of accounting standards (ie, GAAP) and the setting of regulatory capital and reserves should be decoupled so that one does not drive the other.
  • Constituents have strongly divided views on issues relating to the accounting for financial instruments and reporting by financial institutions, particularly as regards the use of amortized cost vs. fair value measurements. I will discuss some of the key issues in these debates, including concerns about 'procyclicality'. I will also offer some thoughts on why reporting both fair value information and amortized cost information might help bridge this divide by providing investors and regulators with better, more timely insights on the performance, financial condition, and underlying risks at financial institutions, without eliminating traditional measures of net income and earnings per share and while also allowing regulators to independently establish regulatory capital requirements.
  • How we are systematically and thoroughly addressing these important issues in our project to improve the accounting for financial instruments.


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